Question

Lori buys a $459 certificate of deposit (CD) that earns 5.6% interest that compounds monthly. How much will the CD be worth in 6 years? (Express your answer rounded correctly to the nearest cent!)

Answer 1

According to the question:

Principal,
`P =\$ 459`

Rate of interest,
`r=5.6\%`

Time,
`t = 6 \ years`

Compounded Monthly.

According to the formula of Compound Interest, the worth of certificate of deposit in 6 years will be:

`A = P(1+(r)/(n) )^(nt)`

i.e.,
`A = 459(1+(5.6)/((100)(12)) )^((12)(6))`

i.e.,
`A = 459(1+(56)/((10)(100)(12)) )^((12)(6))`

i.e.,
`A = 459(1+(14)/((10)(100)(3)) )^((12)(6))`

i.e.,
`A = 459(1+(14)/(3000) )^((12)(6))`

i.e.,
`A = 459((3000+14)/(3000) )^((12)(6))`

`A = 459((3014)/(3000) )^(72)`

`A \approx \$ 641.80`